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Risk Management For a Small Business Welcome Agenda Ground Rules Introductions Objectives Identify the common risks associated with a small business Identify the external and internal factors which affect risk for a small business ID: 771750Direct Link: Link:https://www.docslides.com/pamella-moone/risk-management-for-a-small-business-1748400 Embed code:
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Risk Management For a Small Business
Welcome Agenda Ground RulesIntroductions
Objectives Identify the common risks associated with a small businessIdentify the external and internal factors which affect risk for a small business Identify situations which may cause risk for a small business
Objectives Indentify the common warning signs of risk for a small businessImplement, monitor, and evaluate a risk management plan for a small business
What Do You Know? What do you know or want to learn about risk management?
Risk Management Identifying areas of threat to the businessAssessing the potential impacts and managing these Growth and continued existence of the business
Discussion Point #1: Risks from Positive Situations What positive situations or opportunities can you think of that may be risks?
Human Risks Death Owner EmployeeIllnessShort term Long term Indefinite
Human Risks Theft and fraud Product and inventory theft Time sheet fraudAccounting and cash fraudLow morale, dissatisfaction Failure to perform Sabotage of systems, equipment or customers
Equipment and Information Technology Risks Equipment breakdownsNew equipment integration Worn older equipmentDamage to vehicles
Equipment and Information Technology Risks Information technology downtime Lack of backup or recovery system Updates and repairsPower and connectivity (physical damage and outdated systems)Lack of administrative controls
Other Internal Risks Physical plant repairs Breaks in lines or utilities Routine maintenanceIncidentsWork related injuries Damage to others’ property by employees Damage to your property by others
Other Internal Risks Cash flow changesUnexpected costs Loss of credit linesExpenses to establish lines of credit
Activity 2: Internal Risks What other internal risks can a business owner control?
Competition and Market Risks Loss of clients or customersLoss of employees Decrease in sales prices/fluctuating marketsIncreases in vendor costsOil or gasoline price increases Fixed cost changes (e.g., rent)
Business Environment Risks LawsWeatherNatural Disaster Community
Discussion Point #3: External Risks You own a steak house. A tainted meat scare in your area changes demand. How do you manage this risk or controlits effects?
Personal Conflict Risks Family obligations, illnesses or deathsEvents of disaster that affect the home Community involvementComplacency
Discussion Point #4: Risks to Continued Operations What is required for your business to continue operations?
Risk Identification Written business plan Outside sources to assist inidentifying Risks of your vendors or supplierBusiness continuity assessment
Warning Signs Excessive debt in relation to owners equity (total liabilities / owner’s equity)Reliance on a small number of customers Reliance on one product Reliance on one or a small number of vendors
Warning Signs Cash flow problemsIrregularities in accounting, bank or timecard records Irregularities in computer system administrative reportsHigh employee turnover rate
Risk Evaluation Identify needs for business continuityIdentify needs for potential or planned growth Discuss risks with managersCommunicate risks to managers
SWOT Analysis Strengths WeaknessesOpportunities Threats
Other Resources Small Business Administration Audit Firm or CPA Bank or Commercial Lender Risk Insurance Provider Internet Source
Risk Measurement Effect on potential earnings and cash flowImpact on the business for future growth Costs related to the risk, should it occurWhat would change in your business as a result Weighing costs versus the benefits of the control
Importance of Risk Management Cash Flow Stability Credit Longevity
Risk Control Management and Implementation
Equipment and Vendors Inclusion in initial written business planReaddress, monitor and update business plan periodically Insure equipment and use service plansKnow your vendors and suppliers – backup relationships
Business Continuity Location to continue business operationsEstablish a manual system Train staff to continue operationsBackup operating systems, list staff duties and contactsReview contracts with vendors for provisions Know systems provider backup and contingency operational plans
Information Technology Systems Do not share login informationProtect systems with firewalls Institute levels of accessPerform other reportsSample transactions or use trial transactionsConduct scheduled and surprise audits
Competition Shop themCheck advertisingProduct lines PricingCustomer interactionEmployee retention
Activity 5: Assets What is your most liquid asset? How can you protect it?
Accounting and Cash Control Separation of dutiesDual control of cash Levels of authority observedPeriodic auditsSurprise audits Insured deposits – FDICPlan for reserves in the budget
Employee Management Pre-employment screening and background checksJob descriptions and duties Communicate clear expectationsCross train staffIdentify temp agencies that specialize in your field Periodic evaluations and feedback
Employee Management Manage by being present or walking aroundAudit for payroll or time fraud Benefits and compensation for retentionIncentives to avoid injuries and damages
Business Work Strategy How can you manage your own risks?Set work hours Plan work with a balanceSet realistic goalsTrain support staff or an assistant Include in disability or death in business planSupport systemAnticipate family and home needs
More on Control Management Communication within organizationRoutine assessment of physical plant Be alert to changes in the community and lawsAwareness of news in the economyUtilize lines of credit only when needed Insure against damages from weather and disastersBackup utilities – phones and generators
Lead by Example Ethical and honest behavior will begin with management
Exit Strategy Include exit strategy in business planRevisit it periodically Insurance payment and liquidation of assetsLiquidation of assets without insuranceTrustee to handle Family memberEmployees
Plan and manage risks to succeed!
Eight Key Points to Remember There are internal and external risks associated with a small business Begin assessing the risks by completing a list of those events or resources involved with the business that could impact continued operations and cash flowThe costs to insure or minimize risks should be weighed to the potential impact involved A business continuity plan should be part of your overall business plan
Eight Key Points to Remember Strategies to avoid risks can include: communication, setting expectations, support systems, training staff, insurance, assessment and contingency planning Be honest in reviewing your business for risk and warning signsSeek assistance from others An exit strategy is important
Summary What final questions do you have?What have you learned? How would you evaluate the training?
Conclusion You learned about: Internal and external risks of a small businessHow to identify and reduce the negative effects these can have on your business Warning signs of riskThe steps in risk management planning The importance of containing these risks The need for an exit strategy